Enterprise Financial Services Corp (EFSC) Q4 2025 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call summary shows strong financial performance with a net income of $201 million, dividend increase, and anticipated loan and deposit growth. Despite increased NPAs, management is optimistic about resolution. The Q&A reveals a positive outlook on fee income, deposit growth, and credit quality. The slight decrease in NIM and charge-offs are concerns, but overall guidance remains optimistic. Given the market cap of $1.46 billion, these factors suggest a positive stock price movement of 2% to 8% over the next two weeks.
Key Financial Performance
Earnings per diluted share (Q4 2025) $1.45, an increase from $1.19 in the linked quarter and $1.28 in Q4 2024. The increase was driven by the branch purchase in Arizona and Kansas, which complemented the relationship-oriented business model and expanded net interest income.
Net interest income (Q4 2025) $168 million, a quarterly increase of $10 million compared to the linked quarter and $22 million compared to Q4 2024. This was due to disciplined loan and deposit pricing and the branch purchase.
Net interest margin (Q4 2025) 4.26%, a slight improvement due to disciplined pricing and a high-quality deposit base.
Balance sheet growth (2025) 11%, exceeding the mid- to high single-digit growth goal. This was driven by organic growth and the branch purchase.
Tangible common equity to tangible assets ratio (Q4 2025) 9.07%, stable and strong.
Return on tangible common equity (Q4 2025) 14.02%, reflecting strong earnings performance.
Tangible book value per share (Q4 2025) $41.37, relatively stable for the quarter and an 11% increase for the year. The stability was due to strong earnings offsetting dilution from the branch purchase.
Dividend (Q4 2025) Increased by $0.01 per share to $0.32, reflecting confidence in high-quality earnings.
Loan growth (Q4 2025) $217 million, largely attributed to acquired loans from the branch purchase. This was offset by a $70 million movement of Southern California commercial real estate loans into OREO.
Deposit growth (Q4 2025) $1 billion, with $400 million from new and existing clients and $600 million from the branch purchase. The cost of deposits decreased to 1.64%, and DDA to total deposits improved to 33.4%.
Loan-to-deposit ratio (Q4 2025) 81%, indicating strong liquidity.
Net income (2025) $201 million, or $5.31 per diluted share. This reflects strong capital leverage and growth in tangible book value per share by 11%.
Nonperforming assets (Q4 2025) 95 basis points of total assets, an increase from 83 basis points in the linked quarter. This was due to the movement of Southern California real estate loans into OREO, with progress expected in reducing NPAs in the next quarters.
Net charge-offs (2025) 21 basis points of average loans, including 3 basis points related to Southern California loans. Adjusted net charge-offs were 18 basis points.
You have reached the limit. Sign up to access full content
Get started
Operating Highlights
Branch Purchase in Arizona and Kansas: The company closed on the branch purchase in Arizona and Kansas early in the fourth quarter, which complemented their relationship-oriented business model and helped drive expansion of net interest income.
Market Expansion in Arizona and Kansas: The branch purchase accelerated the company's strategy in two higher-growth markets by several years, contributing to a $1 billion deposit growth in the fourth quarter.
Net Interest Income Growth: Net interest income for the quarter increased to $168 million, a $10 million increase from the linked quarter and $22 million compared to the fourth quarter of 2024.
Loan Growth: Loan growth for the quarter was $217 million, largely attributed to acquired loans from the branch acquisition.
Deposit Growth: Deposits grew by $1 billion in the fourth quarter, with $400 million from new and existing clients and $600 million from the branch purchase.
Operational Efficiency: The company plans to automate non-value-added tasks using investments in technology to enhance productivity and efficiency.
Focus on Credit Quality: The company aims to reduce nonperforming assets (NPAs) to historical levels of 35-40 basis points over the next two quarters.
Technology Investments: Clients are expected to invest in technology, robotics, and machine learning to improve productivity and efficiency, supported by favorable tax treatment for such investments.
You have reached the limit. Sign up to access full content
Get started
Risk or Challenges
Nonperforming Assets (NPAs): The level of NPAs is elevated at 95 basis points of total assets, significantly above the historical norm of 35-40 basis points. This poses a risk to the company's credit quality and financial stability.
Southern California Real Estate Loans: Approximately $70 million of commercial real estate loans in Southern California were moved into OREO due to foreclosure. While progress is being made to sell these properties, the situation reflects credit risk and potential financial losses.
Loan Charge-Offs: Net charge-offs increased to 21 basis points for the year, up from 16 basis points last year, indicating a rise in credit losses.
Interest Rate Environment: Lower interest rates on variable loans and short-term assets have led to a decline in earning asset yields, which could pressure net interest margins.
Branch Acquisition Costs: The recent branch acquisition incurred $2.5 million in one-time costs and added $4.2 million in incremental operating expenses, which could impact short-term profitability.
Sponsor Finance and Construction Segments: These segments experienced contraction as sponsors monetized portfolio companies and developers completed and sold projects, potentially limiting growth opportunities.
Legal Industry and Escrow Services Deposits: The company exited higher-yielding deposits in this segment, which could impact deposit growth and profitability.
Economic and Market Conditions: While clients remain optimistic, economic uncertainties and market conditions could impact the company's operations and financial performance.
You have reached the limit. Sign up to access full content
Get started
Guidance & Outlook
Balance Sheet Growth: The company aims to continue growing its balance sheet with quality and consistency, targeting mid- to high single-digit growth rates in 2026, supported by organic growth and strategic acquisitions.
Credit Quality Improvement: The company plans to reduce nonperforming assets (NPAs) from 95 basis points to a more normalized level of 35-40 basis points over the next one to two quarters, primarily through the sale of foreclosed properties and resolution of nonperforming loans.
Net Interest Margin (NIM): The company expects the net interest margin to stabilize at approximately 4.2% in 2026, supported by strategic pricing on loans and deposits and a favorable funding mix.
Loan Portfolio Growth: The company anticipates growth in its SBA 7(a) owner-occupied CRE production, particularly as interest rates become more favorable in 2026. Growth is also expected in low credit risk categories such as Life Insurance Premium Finance and Tax Credit Finance.
Deposit Growth: The company projects continued organic deposit growth, leveraging its diversified deposit strategies and favorable mix of noninterest-bearing deposits to control costs and support profitability.
Technology and Efficiency Investments: The company plans to enhance productivity and efficiency by automating non-value-added tasks, leveraging prior investments in technology, robotics, and machine learning.
Market Trends and Client Outlook: Clients in industries such as power generation, data centers, and infrastructure improvements are optimistic about 2026, expecting strong performance and opportunities. Investments in technology and robotics are anticipated to increase, supported by favorable tax treatments.
You have reached the limit. Sign up to access full content
Get started
Shareholder Return Plan
Dividend Increase: The company increased its dividend by $0.01 per share to $0.32 for the fourth quarter of 2025.
Annual Dividend Growth: The annual dividend was increased by $0.16 per share to $1.22 for the year 2025.
Dividend History: The company has been increasing its common stock dividend since 2015, achieving a 17% compound annual growth rate over the past 11 years.
Share Repurchase in Q4 2025: The company repurchased 67,000 shares at an average price of $52.64 during the fourth quarter of 2025.
Annual Share Repurchase: For the year 2025, the company repurchased over 258,000 shares at an average price of $54.60.
You have reached the limit. Sign up to access full content
Get started
Key Q&A
Q:What is the timing of the foreclosed properties taken into OREO and their expected resolution?
A:The foreclosed properties were taken into OREO in mid-December after a favorable bankruptcy court ruling. Six out of seven properties were taken into OREO, with the seventh property requiring a retrial in February. Management is optimistic about resolving these properties by the end of the second quarter.
Q:Were there any pre-existing discussions with interested parties regarding the foreclosed properties before legal ownership was obtained?
A:Yes, there were interested parties reaching out before legal ownership was obtained due to the public nature of the litigation. However, contract negotiations and monetization of the assets could only proceed after ownership was secured.
Q:What are the expectations for fee income and noninterest expense growth in 2025?
A:Fee income is expected to grow at about 5% year-over-year on a recurring basis, excluding gains on OREO. Noninterest expenses are projected to grow around 5%, with a run rate of $423 million plus $18 million for acquired branches.
Q:What is the status and outlook for the two loans totaling $28 million that migrated to nonaccrual in Q4?
A:One loan is a $22-23 million retail center in Riverside, California, with good loan-to-value and active exit negotiations. The second is a $6 million residential property in San Diego, with a valuation of 60-65% of appraised value. Management expects minimal loss content but notes the timing for resolution of the second loan is less clear.
Q:What are the expectations for SBA gain on sale revenue in 2026?
A:SBA gain on sale revenue is expected to grow modestly by about 5% from 2025 levels. The government shutdown in Q4 2025 impacted this revenue line, but it is included in the 2026 plan.
Q:What is the outlook for tax credit revenue in 2026?
A:Tax credit revenue is expected to remain relatively flat at $7-7.5 million, with some potential variability depending on rates and business performance.
Q:What is the expectation for deposit gathering and its relation to loan growth in 2026?
A:Deposit gathering is expected to exceed loan growth, with overall balance sheet growth projected at 6-8% and mid-single-digit loan growth. The spot rate of deposit costs was 1.6% as of December.
Q:What is the guidance for net interest margin (NIM) and its dynamics in 2026?
A:NIM is expected to step down slightly to around $420 million and remain stable, even with potential Fed funds rate cuts. Management feels well-positioned to defend the margin in the current rate environment.
Q:What is the outlook for provisioning and credit quality in 2026?
A:Provisioning is expected to normalize as charge-offs decrease from 2025 levels. Management is optimistic about credit quality but remains realistic about resolving remaining NPAs and ORE.
Q:What is the approach to capital management and buybacks in 2026?
A:Management plans to focus on organic growth, credit resolution, and integrating 2025 acquisitions. There is $1.1 million in authorized buybacks, with 100,000 shares currently covered by a plan. M&A is a low priority.
Q:What drove the $20 million in charge-offs in Q4 2025, and what is the outlook for charge-offs?
A:Charge-offs included $3 million from OREO properties, $3.5 million from two sponsor finance credits, $3 million from a multifamily project, and $8.5 million from a C&I credit in Southern California. Management does not expect this level of charge-offs to continue in 2026.
Q:What is the expectation for fee income growth in 2026?
A:Fee income is expected to grow mid-single digits, starting from a base of approximately $75 million, with an additional $2 million from acquired branches.
Q:What is the outlook for loan growth in 2026?
A:Loan growth is projected at mid-single digits, with strong pipelines in life insurance premium finance, the Southwest region, and a mix of C&I and CRE loans.
Q:Review of Unclear Management Responses
A:Management avoided providing specific timing for the resolution of the $6 million residential property loan in San Diego, citing unclear timing. Additionally, while they discussed the potential for SBA gain on sale revenue growth, they did not provide detailed plans or contingencies for achieving this growth.
You have reached the limit. Sign up to access full content
Get started
Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
CI CRE
CRE life
California estate
Escrow Services
Finance
Industry Escrow
Legal Industry
PSAs
Southwest
Specialty
ability
banking specialty
branch acquisition
branch deposit
branch purchase
client base
company
consistency
construction
consumer banking
contraction
deposit client
deposit noninterest
estate loan
franchise
generation
goal balance
improvement
investment technology
level NPAs
loan OREO
loan portfolio
movement estate
path
productivity efficiency
quality deposit
wallet
EFSC Transcript
Enterprise Financial Services Corp (EFSC) Q4 2025 Earnings Call Transcript
Positive1-27
The earnings call summary shows strong financial performance with a net income of $201 million, dividend increase, and anticipated loan and deposit growth. Despite increased NPAs, management is optimistic about resolution. The Q&A reveals a positive outlook on fee income, deposit growth, and credit quality. The slight decrease in NIM and charge-offs are concerns, but overall guidance remains optimistic. Given the market cap of $1.46 billion, these factors suggest a positive stock price movement of 2% to 8% over the next two weeks.
Enterprise Financial Services Corp (EFSC) Q3 2025 Earnings Call Transcript
Unknown10-28
The earnings call presents mixed signals. Financial performance shows growth in net interest income and loan growth, but there's a rise in nonperforming assets and credit losses. The Q&A reveals uncertainty in resolving key loans and vague guidance on fee income. The branch acquisition could dilute tangible book value, but specialty deposits show promise. Given these factors, and considering the company's small-cap status, the stock is likely to remain neutral, with a potential slight positive tilt due to ongoing growth and strategic initiatives.
Enterprise Financial Services Corp (EFSC) Q2 2025 Earnings Conference Call Transcript
Positive7-29
The earnings call summary indicates strong financial performance with loan and deposit growth, stable nonperforming assets, and increased noninterest income. The Q&A section reveals positive analyst sentiment and management's confidence in loan growth, margin stability, and strategic priorities. Although there are concerns about expenses and vague M&A responses, the overall outlook is optimistic, supported by the branch acquisition and dividend increase. Given the company's market cap, the stock is likely to react positively, resulting in a 2% to 8% increase over the next two weeks.
Earnings call transcript: Enterprise Financial Q1 2025 beats expectations
Positive4-29
The earnings call reveals strong financial performance with a 24.8% increase in EPS and a 6.4% rise in net income, alongside stable net interest margins and a dividend increase. The Q&A highlighted cautious but positive management sentiment, with no alarming risks disclosed. Despite some uncertainty in loan resolutions, the overall outlook remains robust with a focus on balance sheet growth and capital efficiency. Given the small market cap, a positive reaction is likely, but not exceedingly strong due to the cautious tone on some issues.
EFSC Slides
EFSC Report
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period endedSeptember 30, 2025.
10-Q
2025-10-31
ENTERPRISE FINANCIAL SERVICES CORP 10-Q
10-Q
2025-08-01
ENTERPRISE FINANCIAL SERVICES CORP 10-Q
10-Q
2024-11-01
ENTERPRISE FINANCIAL SERVICES CORP 10-Q
10-Q
2024-07-26
Frequently Asked Questions
Where does this earnings call transcript come from?
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
How soon is the transcript available after the earnings call ends?
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
Is the transcript edited or altered in any way?
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
Why do some answers appear as “Unclear” or “Inaudible”?
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
Who creates the AI Summary and Key Q&A highlights shown above the transcript?
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
